Ford and GM Shares Rise as Automakers Top Estimates
Before Wednesday's opening bell, Ford shares were trading at $10.77, up 41 cents, or about 4%, while GM shares were trading at $24.41, up $1.12, or about 5%.
Ford, which reported on Tuesday, earned 41 cents a share. Analysts surveyed by Thomson Reuters had estimated 30 cents. GM, which reported Wednesday, earned 93 cents a share, excluding items. Analysts had estimated 60 cents.
Both companies reported strong North America earnings but said 2012 losses in Europe will exceed $1 billion. However, Ford announced a major restructuring effort on Thursday, Oct. 25. In its earnings release on Tuesday, GM said it estimates its earnings before interest and tax in the region will be between negative $1.5 billion and negative $1.8 billion, "depending on the level of restructuring activity in the fourth quarter."
GM said it is "targeting full-year 2013 EBIT-adjusted for GM Europe to be slightly better than 2012. Break-even EBIT-adjusted results are targeted by mid-decade."
In a report on Ford issued Wednesday and titled "We've Seen This One Before -- It Has a Great Ending," Jefferies analyst Peter Nesvold said Ford's "margins in North America keep setting all-time bests on normalized-type volumes, a tribute to arguably the auto industry's most successful restructuring on record." Ford reported a pretax margin of 12% in North America in the third quarter.
"Now the company's focus has turned to Europe," Nesvold wrote. "You've seen what they've done before. So why don't you own the stock?" He has a buy on Ford and a $14 price target.
Writing on GM on Wednesday morning, Nesvold said, "Similar to Ford, North America drove much of the strength while Europe was within a penny of expectations. However, (Asia) also contributed meaningfully to the beat (a surprise given strikes in Korea). While GM cannot present a (Europe) restructuring plan publicly just yet, it is at least trying to frame the magnitude of the losses."
Regarding Europe, Nesvold held out hope for the entire automotive industry, writing that "Europe's automotive industry has a dreadful market structure. After years of kicking the can down the road, the industry's time of reckoning surely seems to be near."
-- Written by Ted Reed in Charlotte, N.C.
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